– Week in Review: Soaps Continue; May 28 – 31, 2012

A comprehensive analysis from Bloomberg claims that the company will run out of cash sometime next year unless it disposes of more assets. The company has been investing for some time in new wells faster than the cash from existing operations was coming in the door. CEO McClendon has a 2.5% interest in these wells and had to put up his share of well development costs in advance of revenues also. Thus it appears that the company and its CEO are financially over leveraged and the driver is not the share price of CHK but the low price of natural gas on the market. Chesapeake may have lead the way to its own demise as it pioneered the use of the controversial fracturing technology for drilling. Others adopted that technology and natural gas is at a low as supplies have risen.

Other news on Chesapeake: Carl Icahn accumulated over 7% of the company and is demanding representation on the board, which he usually does in these situations. A major New York pension fund has declared itself opposed to two current board members that are up for re-election in June.

Facebook has lost over 20% of its share price since going public last Friday.

Recent Quotes – Last week Goldman Sach’s Director of Asset Management Jim O’Neill said: “Is it really that entirely desirable to have financial stability at the expense of everything else?” This statement demonstrates three things: (1) Mr. O’Neill sees financial stability as a roadblock to “everything else” – a false choice; (2) he sees financial stability as undesirable; and (3) he doesn’t understand how important financial stability is to the other 7 BILLION-with-a-B people on this planet. I suggest he try making it on a minimum wage for a year so he can experience first hand the importance of financial stability.